Chanakya Business Simulation briefing BVG Case study

1. ISB : 21 – 23 April, 2015
Business Simulation
2016

2. 22
BUSINESS MANAGEMENT SIMULATIONS
Hypothetical
Business Fictitious
Currency
Virtual
cash
Assets &
Liabilities
Business
operations
Consumable
Products
Imaginary
market
BASE: Complex computer algorithm replicating
real business situation which are ever changing

3. 3
creates complex business situation and sensitizes to
visioning, planning and execution facing the
challenges in the market and with competitors.

4. The Task / Goal

5. 5
ACHIEVING – THE TASK
 Turnkey company in QUARTER 0
 Take it forward for the next 4 Quarters
 A quarter is 3 months
 Trial Quarter (Mock or
Practice Round)
 Actual Qtr 1st
- 4th

6. 6
INDUSTRY ENVIRONMENT
CHANAKYAN ECONOMY
INDUSTRY: BEVERAGE
CURRENCY: Cu

7. Products
MinAqua Zero Cal
Juicy
Spark

8. Raw Material
Water Additives

9. GAME DOCUMENTS
INDUSTRY
Sector Analysis Report (2-5)
Standard Decision Form (SDF)- 11
The Gazette
Starting Conditions ( 9 & 10 )
Information Package ( 7& 8 )
Sector Update ( 7 )
Management Report ( 6 )

10. Management Report (MR)
Page No. 6

11.  Management Report (TOP PORTION –1ST
HALF) - 6
 Balance Sheet
 Income Statement
 Cash Statement
MANAGEMENT REPORT

12. 12
Asset & Liability
Revenue & Expense
Cash Inflow &
Outflow

13. 1313
MANAGEMENT REPORT
BOTTOM PORTION 2ND
HALF : Page NO. – 6
 Summary of outstanding Term Loans
 Forecast of Gen. Econ. Environment
 Demand Forecasts
 Inventory Data (Finished Goods & Raw
Material)
 Messages

14. 14
Finished Goods
Raw Material

15. Page – 7
(Common Information on every Quarter for all teams)
Plant Capacity.
Company Name i.e. Team No.
Machine Capacity
Equity Share Price.
Winning Criterion : Cum PAT.

16. 16
Information No. (8)
Information No. (9)

17. Present Products
MinAqua Zero Cal
MIN

18. Future Product Launches
Juicy Spark

19. 19
Starting Conditions
Raw Material
Water Additives

20. Raw Material Requirement and Cost
PRODUCTS (Mix of) Water + Addit.
MinAqua (Units) 9 1
RAW MATERIAL RATE (PER UNIT) Water Addit.
Base Rate Cu 5.00 Cu 20.00
Spot Rate NA Cu 30.00
PURCHASE CONSTRAINTS on previous Quarter
only on ADDITIVE + 60%
Spark (Units) 6 5
Juicy (Units) 6 4
Zero Cal (Units) 8 2

21. MinAqua ZCal Juicy Spark Total
on 6000 3000 9000
terial Consumption
er (per unit) 9 8 6 6
. (per unit) 1 2 4 5
ater 54000 24000 78000
di. 6000 6000 12000
-------------------------------------------------
terial Cost (Water: Cu 5 per unit; Addi.: Cu 20 per unit)
er (78000 Units x Cu 5) Cu 390,000
p (12000 Units x Cu 20) Cu 240,000
ost of Raw Material Cu 630,000
RAW MATERIAL CALCULATIONS

22. Example: Raw Material Purchase
If you want to buy 55,000 units of Additives in Qtr-1
Qtr 0 Purchase 30,000 Units
Eligibility in Qtr 1 on Base Rate (+60%) 48,000 Units
i.e. 48,000 X Cu. 20 = Cu. 960,000
Remaining 7,000 units will be allocated by default at
Spot Rate
i.e. 7,000 X Cu. 30 = Cu. 210,000
Minimum 40% i.e. (-60%) of 30,000 = 12,000 Units
Minimum Purchase will be 12,00X20 = Cu 240,000

23. 23
Raw Material Numbers Value
Water Add Water Add
Fresh Purchase 100,000 30,000 500,000 600,000
Consumption 78,000 12,000 390,000 240,000
Actual production
PAYMENT POLICY
Cash out Flow - Current Qtr. (Aprox) 50% 50%
- Next Qtr. (Aprox) 50% 50%

24. 24
Raw Material Numbers Valuer (Cu)
Water Add Water Add
Fresh Purchase 100,000 30,000 500,000 600,000
Consumption 78,000 12,000 390,000 240,000
50% of 1,100,000
630,000

25. 25

26. RAW MATERIAL SHORTAGE – EFFECT
Example:
MinAqua ZeroCal Juicy
Actual Prod 15000 7500 2500
Additive Rqd 15000 15000 10000
Total Addit. Required = 40,000
if Fresh Purchase of Addit. = 30,000
The allocation will be
MinAqua ZeroCal Juicey

27. WAREHOUSING COST
On Qtr. End Inventory of Finished Goods and Additive (RM)
Closing Inventory of
Finished Goods = 0
Additive = 18000
18,000 X 2 = 36,000
Rate : Cu per Unit
Finished Goods: 6
Raw Material Addi: 2
PAYMENT POLICY
100% in Same Qtr.

28. 28

29. 29
Cost
18000 x Cu 2/-
= Cu 36,000

30. 3030
Direct Packing Cost
 Linked to actual production
 May increase/ decrease in future
launches
 Different Rates
for each product

31. 3131
Direct Packaging Cost
Actual Production :
6000 Units of MinAqua
3000 Units of ZeroCal
Packaging cost/unit : Cu 6000X5 + 3000X10
Total Cost : Cu 60,000
Payment Term : 100% Current Qtr
Products Rate per unit
------------------------------------------------------------------
MinAqua Cu. 5.00 (Base)
Zero-Cal, Juicy,
and Spark Cu 10.00 (Twice
of Base Rate)

32. 32
Packaging cost :
MinAqua : Cu 6000X5 = Cu 30000
Z-cal : Cu 3000 X10= Cu 30000
Total Cost : Cu 60,000

33. 33

34. 3434
Production Overheads
 Consumables,
utilities & Salaries
 Fixed in nature
lab
 May increase/
decrease
Cost Cu 300,000 Lakh per Qtr
Payment : 100% Same Qtr

35. 35

36. Plant & Machinery
 Same facilities can
produce all products
 Efficiency factor : 100%
 Current Capacity :
 Plant 15000 Units p/Qtr
 Machine 10000 Units p/Qtr
Plant Capacity 15,000 Units
Rate Cu 200/- per Unit
Total Plant
Cu 3,000,000
Machine Capacity 10,000 Units
Rate Cu 100/- per Unit
Total Machine
Cu 1,000,000

37. 37
Plant
Machinery

38. Plant & Machinery Depreciation
 Current capacity
 Plant 15000 Units
 Machine 10000
 Life : 10 Qtrs
 Rate Cu 200 Per Unit Plant
and Cu 100 per Unit Machine
Depreciation Cost on the value of Plant & Machine
divided by Life in Qtrs
Plant 15000X200 = 3000000 / 10 = Cu 300,000
Machine 10000X100 = 1000000 / 10 = Cu 100,000

39. 39
Plant
Machinery

40. Marketing Cost
Payment Policy: 100% Same Qtr.
FIXED COST
• Advertising, Sales promotion
• Branding and Distribution
• May give more demand
Cu 200,000 per Quarter
VARIABLE COST
• Dealer commission/ margins (Co-branding)
• Across all the products
• May increase demand
5% on Total Sales Revenue per Quarter
Organize Sector : (Demand) MinAqua : 80%

41. 41
Sales Revenue
186,0000
Advertising : Cu 200,000
Dealer Comission : 5%
of Cu 1,860,000 = Cu 93,000
Total = Cu 293,000

42. MinAcqua :
Production 6000 Units and Selling Price Cu 190 p/unit
6000 x 190 Cu = 1,140,000
Zcal:
Production 3000 Units and Selling Price Cu 240 p/unit
3000 x 240 Cu = 720,000
Total Sales Revenue = Cu 1,860,000
Sales Revenue (Cash Collection)
• Quantity Sold x Price quoted for sale
• 100% Cash Collection in Same Quarter

43. 434343
Sales Revenue (Cash Collection)
MinAcqua : 6000 x 190 = 1,140,000
ZCal : 3000 x 240 = 720,000
Total Sales Revenue = Cu 1,860,000

44. 44

45. Marketing Data-Selling Price
Product Lowest Highest
MinAqua
ZeroCal
Juicy
Spark
240
300
1001
150
240
600
18001200

46. Expansion of Plant & Machinery
 In multiple of 1000 Units
 Life : 10 Qtrs
 Rate
 Cu 200 Per Unit
 100 Per Unit
 Lead Time : 1 Qtr
Depreciation Cost in next Quarter on installation
i.e. Value of Plant & Machine divided by Life in Qtrs
Plant 1000X200 = 200000 / 10 = Cu 20,000
Machine 1000X100 = 100000 / 10 = Cu 100,00
Payment of Expansion: Current Qtr (Cash outflow)
Depreciation: Next Quarter (Expenditure)

47. 47
Pro Rata Allocation of Production
Pro-rata allocation in case production indicated is
more than the available capacity
Assume that current production limit is 15,000.
In case total production is indicated as 18,000 of
three products like:
MinAqua ZeroCal Juicy
9000 6000 3000
it will adjust in the ratio of 15000/18000 or 5/6
7500 5000 2500

48. Finance – Borrowings
Debt Equity Limit is 1
(100% of Net Worth of previous Qtr)
(All amount in Cu)
Equity Share Capital in Q0 4,500,000
Reserve & Surplus in Q0 105,750
Total Net Worth 4,605,750
Debt Limit (Loan) 100% of Total Net Worth 4,605,750
(1)(1) BB
AA
NN
KK
Max LIMIT: Cu 3.88 Lakh
(2)(2) BB
AA
NN
KK O DO D

49. 494949
Finance – Interest on Borrowing
Rate of Interest (Per Annum)
3 yr Loan : 13% to 15%
Bank OD : 17% to 19%
Short term investment : 8% Per Annum (2% p/Qtr)
Loan Processing Charges: = Cu 15,000
No charges for Bank OD
Loan Foreclosure charges on repayment
1% on prepayment amount excluding EQI

50. 505050
Shark Loan
4 x PLR
Minimum Cash Balance 5,00,000
Finance

51. 51
Corporate Tax Rate – 25%
(Gross Profit – Expenses)
Face Value of Equity Share = Cu 10
Equity Share Capital = Cu 4,500,000
Total Shares = 450,000 Nos.
Finance

52. 52
Total Cash in Qtr-1
Cash in Hand in Previous Qtr
+ Accounts Receivable
- Accounts Payable
+ Expected Sales Revenue
= Total Cash Available
Less: Expenses like
a) Raw Material, Direct Labour, Godown Charges,
Production Overheads etc.
b) Selling and Admin Expenses, Info. Package exp., R&D
exp Interest and taxes etc.
c) Cash Payment of Plant & Machine expansion.

54. 54

55. Domestic Demand of Q1 61423
80% of Domestic Demand = 49145
Say 49200 or 49000 aprox
Average Domestic Demand = 49145/10 = 4914
Say 4920 or 4900 aprox.

57. 5757
Trial Round
Calculate per unit cost of Production
1. Raw Material Cost
Water 9 X 5 45
Addi. 1 X 20 20 65
1. Expected Warehousing Cost
2. Direct Packaging cost (one bottle) 5
3. Production Overheads Cu 3,00,000/10,000 30
4. Depreciation Cu 4,00,000/10,000 40
Cost of Production = 140
Add other Costs such as
1. Marketing Cost (Selling & Distribution Exp)
Fix cost: Cu 2,00,000/10,000 20
Delr Com. 5% Max Cu 240 x 5% 12
1. Profit Margin (Cu 60) 45
2. Corporate Tax (25% of profit) 15
Selling Price 232